Goodhart's law

Paper Promises

by Philip Coggan  · 1 Dec 2011  · 376pp  · 109,092 words

be employed, the country improved, manufacture advanced, trade domestic and foreign be carried on, and wealth and power attained.’3 It is important to understand Law’s thinking since, though his scheme failed, he was the father of modern monetary economics. Gold and silver had previously been thought of as ‘real wealth

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trade was held back by lack of currency. If you created more money, more trade would occur and thus there would be more wealth. In Law’s view, it did not matter that paper money was not backed by an equal amount of gold and silver. ‘The houses of Paris taken together

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the problem of the monarchy’s heavy debts since shares in his enterprises would be sold to the public. Royal patronage also meant that Law’s plan, unlike Bryan’s, was actually put into practice. The duc d’Orléans decreed that all taxes and royal revenues could be paid in the notes of

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Law’s bank, the Banque Générale. Had the scheme been kept on a modest scale, with bank notes backed by gold and silver, French economic growth might

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collect taxes and assume the national debt. Everything seemed to add up; investors could pay for the shares with gold and silver (good), paper from Law’s bank (also good), or with government bonds (another positive, since it reduced the debt). But the system depended on confidence, which in turn relied on

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coined. Servants became as rich as their masters overnight. As investors clamoured to own shares, an informal stock exchange emerged in the rue Quincampoix, near Law’s house. In one (probably apocryphal) story, a hunchback earned 150,000 livres by hiring out his hump as a writing desk so share contracts could

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of the extra money he created without also destroying the speculative frenzy that had supported his scheme. And the speculative frenzy was the key to Law’s popularity. When the share price of his bank collapsed, he was dismissed from royal service, eventually dying in poverty. The French developed a suspicion of

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, jealous of our grandeur and our advantages, than to pass over all our silver and gold and precious stones to them.7 So why did Law’s scheme fail? To his contemporaries, the answer was obvious: he created nothing but worthless pieces of paper. But later economists have seen him as a

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monetary pioneer. The problem in Law’s case was that the credit he created did not get used to create new businesses or trade, not even in the Mississippi basin, that Law

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basis of asset bubbles. Those who demand the creation of more money may promise the former but only deliver the latter. WHAT IS MONEY? John Law’s experiment was, in essence, an attempt to redefine money. Given that mankind has been using money for thousands of years, it is perhaps surprising that

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all the things he needs, from seeds through to combine harvesters. So this is our first monetary use, as a ‘medium of exchange’. In John Law’s view, this was money’s prime function. As media of exchange, paper and electronic money are much more useful than precious metals. It is far

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. One can very broadly break down these into three: precious metals, and other commodity-related currencies; bank notes created by government order, as in John Law’s system; and credit, as created by the banking system. PRECIOUS METALS Western people traditionally regarded gold, and silver, as the only ‘real’ forms of money

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increase its supply relative to another; the official ratio might no longer reflect reality. The relative attractions of coins led to the problem dubbed Gresham’s Law after the Elizabethan financier Sir Thomas Gresham. People might prefer gold coins to other forms of money, perhaps because the official ratio undervalued gold. So

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) in exchange for goods. The gold coins would all disappear from circulation – bad money would drive out good. I experienced a modern version of Gresham’s Law in 2010 on a visit to Iceland, one of the countries that suffered most in the early stages of the debt crisis. Not wishing to

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fair chunk of the British (and American) manufacturing sectors, but had much less success in controlling the money supply numbers. A British economist, Charles Goodhart, coined ‘Goodhart’s Law’, which was that any economic variable was doomed to misbehave as soon as it was targeted. It was like pinning jelly to the wall. The

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more stringent conditions when the loan is renewed. This explains why problems for the banks ripple throughout the economy. If we think back to John Law’s reasoning, we can see why this must be so. If money creation encourages trade by giving people more incentive to purchase goods, then money destruction

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must discourage trade. For nineteenth-century economists, however, John Law’s experiment was a classic example of economic folly. They knew that the only way of ensuring sound money was to base it on gold, and

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in another; all they needed was a way of assessing the gold or silver content of the coins handed over (although there was the ‘Gresham’s Law’ problem that people would hoard the best coins and pass on the worst). In the twenty-first century, shipping over boat-loads of coins is

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had to be set between the two. In 1717, the great physicist set the conversion rate at a level that seemed to undervalue silver. Gresham’s Law duly kicked in. Britons were unwilling to exchange their silver for gold at an unfavourable rate; they withheld their silver coins from circulation. At that

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pulled its troops out of the NATO military command. The French retained an attachment to gold which arguably dated all the way back to John Law’s failed monetary experiment. They had been, with America, one of the two big central-bank holders of gold between the wars and had even sent

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commodities, putting little money down. Again, the more prices are rising, the easier it is to speculate (which is what buying with borrowed money involves). Law’s system, described in Chapter 1, fits the template perfectly. He printed bank notes and lent money so investors could buy shares in the Mississippi Company

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the markets. Charles Kindleberger, a great historian of bubbles, used the Minsky model to examine everything from tulip mania in the seventeenth century to John Law’s system and the Asian crisis of the late 1990s. He showed they followed a template of a ‘displacement’ – some development like a war or technological

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, so companies were rarely punished for piling up the debt. American companies may have been more inclined to take risks because of their country’s favourable bankruptcy laws. These laws arose out of the country’s debtor-friendly culture. In particular, they were influenced by the railroad boom and bust of the mid

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Biofuels may be even worse. Why does this matter? We are accustomed to improvements in productivity; creating more output with fewer inputs. Think of Moore’s Law, where the capacity of a microprocessor doubles every eighteen months. That has allowed computers to be smaller and much more powerful than the room-sized

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money and debts have expanded. These cycles are initially self-reinforcing as the extra money begets confidence, as in John Law’s experiment in the early eighteenth century. That is because one of Law’s insights was correct. Money is a medium of exchange as well as a store of value. The expansion of

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prices. In some cases, they also experienced sharply higher property prices and booming equity markets. The danger is that QE, as it did in John Law’s day, might lead to asset bubbles, albeit not in the country of origin. The policy also attracted criticism from other countries which felt the US

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result of this constraint, central banks may never get round to reducing their bond holdings. If one thinks back to the early eighteenth century, John Law’s scheme also amounted to quantitative easing, as it involved the creation of money, which was used to buy stock in the Mississippi Company, which was

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Germany gilts Gladstone, William Glass – Steagall Act Gleneagles summit Glorious Revolution GMO Gokhale, Jagadeesh gold gold exchange standard gold pool gold standard Goldman Sachs goldsmiths Goodhart, Charles Goodhart’s Law Goschen, George Gottschalk, Jan government bonds government debt Graham, Frank Granada Grantham, Jeremy Great Compression Great Depression Great Moderation Great Society Greece Greenspan, Alan

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Gresham, Sir Thomas Gresham’s Law Gross, Bill G7 nations G20 meeting Guinea Habsburgs Haiti Haldane, Andrew Hamilton, Alexander Hammurabi of Babylon Havenstein, Rudolf von Hayek, Friedrich Heavily

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, Walter Minsky, Hyman Mises, Ludwig von Mississippi Project Mitterrand, Francois Mobutu, Joseph Mongols monetarism monetary policy monetary targets money markets money supply Moody’s Moore’s Law moral hazard Morgan Stanley Morgenthau, Henry Morrison, Herbert mortgages mortgage-backed bonds Multilateral Debt Relief Initiative Napier, Russell Napoleon, emperor of France Napoleonic Wars Nasser

Where Does Money Come From?: A Guide to the UK Monetary & Banking System

by Josh Ryan-Collins, Tony Greenham, Richard Werner and Andrew Jackson  · 14 Apr 2012

COME FROM? A GUIDE TO THE UK MONETARY AND BANKING SYSTEM JOSH RYAN-COLLINS TONY GREENHAM RICHARD WERNER ANDREW JACKSON FOREWORD BY CHARLES A.E. GOODHART Where Does Money Come From? Second edition published in Great Britain in 2012 by nef (the new economics foundation). Reprinted 2011 The moral right of

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for his valuable contributions to the writing of this book. We are also most grateful to Professor Victoria Chick, Jon Relleen, James Meadway, Professor Charles Goodhart, Mark Burton and Sue Charman for their helpful insights and comments. Our thanks go to Angie Greenham for invaluable assistance with editing, proofing and production

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of the banking sector in the 1970s and 1980s 3.6.4. The emergence of digital money 4. MONEY AND BANKING TODAY 4.1. Liquidity, Goodhart’s law, and the problem of defining money 4.2. Banks as the creators of money as credit 4.3. Payment: using central bank reserves for interbank

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suitable for a wide range of audiences, including not only those new to the field, but also to policy-makers and academics. Charles A. E. Goodhart, Professor Emeritus of Banking and Finance, London School of Economics 19 September 2011 1 INTRODUCTION I’m afraid that the ordinary citizen will not like

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. Cardiff: University of Wales Press, p. 27 5 Jevons, W. S., (1896/1875). Money and the Mechanism of Exchange. New York: Appleton and Company 6 Goodhart, C.A.E. (1998). The two concepts of money: implications for the analysis of optimal currency areas. European Journal of Political Economy 14: 407-432

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(2005). op. cit. pp. 17-18 31 Keynes, J. K., (1930). A Treatise on Money: Volume 1 A Pure Theory of Money, Chapter 1 32 Goodhart, C.A.E. (1998). The two concepts of money: implications for the analysis of optimal currency areas. European Journal of Political Economy 14 33 Smithin

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interacts with the central bank, the payment system and the money markets. To start, we need to address the concept of liquidity. 4.1. Liquidity, Goodhart’s law, and the problem of defining money In Section 3.1, we saw that acceptability as a means of exchange and of final settlement were key

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publicly defined as money by an authority in order to better control it, substitutes were produced for the purposes of evasion5 (this is known as ‘Goodhart’s law’).6 We revisit the question of where to draw the line around ‘money’ later in Chapters 5 and 7. The process of defining money becomes

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Limits of Capital London: Verso 4 Ingham, G., (2004). The Nature of Money. Cambridge: Polity Press 5 Dodd, N., (1994). op. cit. p. xx 6 Goodhart, C.A.E., (1989). Money, Information and Uncertainty. London: Macmillan, p. 100 7 BIS. (2003). The role of central bank money in payments systems, Basel

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campaigning group Positive Money. Retrievable from http://www.positivemoney.org.uk/how-banks-create-money/balance-sheets/#destroying 38 Binswanger, M., (2009) op. cit. 39 Goodhart, C.A.E., (1989). op. cit. 40 Werner, R.A., (2005). op. cit. 5 REGULATING MONEY CREATION AND ALLOCATION There can be no doubt that

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1 Hayek, F., (2008-1931). Prices and Production. Auburn, Alabama: Ludwig von Mises Institute, p. 289. Retrievable from http://mises.org/books/hayekcollection.pdf 2 Goodhart, C., (2011). The Basel Committee on Banking Supervision: A History of the Early Years, 1974-97 [Hardcover]. Cambridge University Press: Cambridge 3 Werner, R.A

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working paper 15223 21 BBC, (2012). Libor scandal: Paul Tucker denies ‘leaning on’ Barclays. Retrievable from http://www.bbc.co.uk/news/business-18773498 22 Goodhart, C.A.E., (1989). Has Moore become too horizontal? Journal of Post-Keynesian Economics 14: 134-136 23 For an account of endogenous money: Parguez

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., (1978). Macro-economic models with quantity rationing. Economic Journal, 88: 788-821 31 Malinvaud, E., (1977). The Theory of Unemployment Reconsidered, Oxford: Basil Blackwell 32 Goodhart, C., (1989). Money, Information and Uncertainty, Chapter VII: Credit Rationing 33 Werner, R.A., (2005). op. cit. p. 193 34 Milburn, A., (2009). Unleashing Aspiration

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discovered in Chapter 4, identifying what counts as money is not easy. Financial innovation means that when an instrument is defined and controlled as ‘money’, Goodhart’s Law suggests that substitutes will be found to enable evasion of tax and regulation.4 Such instruments include derivatives based on loans that are secured on

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Press, p. 53 2 Ingham, G., (2004). The Nature of Money. Cambridge: Polity Press, p. 128 3 Thiel, V., (2009). Doorstep Robbery. London: nef 4 Goodhart, C.A.E., (1975). Monetary Relationships: A View from Threadneedle Street. Papers in Monetary Economics, Reserve Bank of Australia 5 Leyshon and Thrift (1997). Money

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. London: Penguin Geithner, T. F., (June 2008). Reducing systemic risk in a dynamic financial system. Remarks at the Economic Club of New York, New York Goodhart, C.A.E., (1975). Monetary Relationships: A View from Threadneedle Street. Papers in Monetary Economics. Sydney: Reserve Bank of Australia

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Goodhart, C.A.E., (1989). Has Moore become too horizontal? Journal of Post-Keynesian Economics 14: 134-136 Gorton, G. and Metrick, A., (2010). Regulating the

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) 122-3, 156 gilts 41, 82, 155-6 gold standard 45-7 Gold Standard Act 1925 46 Golden Period 45 goldsmiths 37, 38-9, 40 Goodhart’s law 61, 138 Government bank accounts 153-60 bonds 41, 78, 118, 120, 122, 124-5 borrowing 122-3, 124-6 intervention to manage exchange rates

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, not least Austrian, Post-Keynesian, ‘Circuitist’, Marxist, Feminist and Green but these are the two that have come to greatest prominence in academic literature. See Goodhart (1998)6 and Smithin (2000)7. Useful guides to different schools of thought on money include Smithin (2000). op. cit. and Ingham (ed) (2005)8

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via repos. This means they are being effectively paid by the central bank to hold reserves. This has prompted former Monetary Policy Committee member Charles Goodhart to call for the central bank to stop paying interest on reserves or even charge a tax on such reserves.33 One reason the Bank

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may be reluctant to take up Goodhart’s suggestion is that there would then be nothing to stop the overnight LIBOR rate falling below 0.5% which is effectively the ‘floor’ set

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of the Reparations Committee established under the leadership of JP Morgan after WWI. † For a detailed history of the Basel Rules pre-Basel II, see Goodhart (2011)2. * Exchange Traded Funds allow investors to track the prices of a bundle of different assets. † Collateralised Debt Obligations combine parts of a large

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in the USA. The New York bank is the key institution in the system because it is the main locus of open market operations. * See Goodhart (1989) for a good summary of theoretical and empirical debates on credit rationing.32 * ‘nominal’ means not adjusted for inflation; in contrast ‘real’ GDP would

The Death of Money: The Coming Collapse of the International Monetary System

by James Rickards  · 7 Apr 2014  · 466pp  · 127,728 words

can never be so given. Friedrich A. Hayek 1945 Any . . . statistical regularity will tend to collapse once pressure is placed on it for control purposes. Goodhart’s Law 1975 In Shakespeare’s The Merchant of Venice, Salanio asks, “Now, what news on the Rialto?” He’s looking for information, gathering intelligence, and attempting

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, it is a problem of the utilization of knowledge which is not given to anyone in its totality. Charles Goodhart first articulated Goodhart’s Law in a 1975 paper published by the Reserve Bank of Australia. Goodhart’s Law is frequently paraphrased along the lines, “When a financial indicator becomes the object of policy, it ceases to

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function as an indicator.” That paraphrase captures the essence of Goodhart’s Law, but the original formulation was even more incisive because it included the phrase “for control purposes.” (In original form, it reads, “Any observed statistical regularity

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will tend to collapse once pressure is placed upon it for control purposes.”) This phrase emphasized the point that Goodhart was concerned not only with market intervention or manipulation generally but also on a particular kind of top-down effort by central banks to dictate

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outcomes in complex systems. Adam Smith, Friedrich Hayek, and Charles Goodhart all concluded that central planning is not merely undesirable or suboptimal; it is impossible. This conclusion aligns with the more recent theory of computational complexity

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, the data are too voluminous, the processing steps are infinite, all the computational power in the world is insufficient, or all three. Smith, Hayek, and Goodhart all make the point that the variety and adaptability of human action in the economic sphere are a quintessential case of computational complexity that exceeds

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, social unrest, and a confrontation with state power. While the Adam Smith and Friedrich Hayek formulations of the economic complexity problem are well known, Charles Goodhart added a chilling coda. What happens when data used by central bankers to set policy is itself the result of prior policy manipulation? ■ The Wealth

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throughout his career. Adam Smith and Friedrich Hayek warned of the impossibility of the Fed’s task and the dangers of attempting it, but Charles Goodhart points to a greater danger. Even the central planner requires market signals to implement a plan. A Soviet-style clothing commissar who orders that all

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many other variables. What happens when you manipulate markets using price signals that are the output of manipulated markets? This is the question posed by Goodhart’s Law. The central planner must suspend belief in one’s own intervention to gather information about the intervention’s effects. But that information is a false

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yet designed a way to make it workable. . . . Rather, a . . . target would be perceived as a thinly disguised way of aiming for higher inflation. Charles Goodhart March 18, 2013 ■ The Meaning of Money What is a dollar? This question has no easy answer. Most people respond that a dollar is money

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Fed’s own staff have expressed reservations about whether forward guidance works at all in the time horizons the Fed is using. Prominent economist Charles Goodhart has said that nominal GDP targeting is “a thinly disguised way of aiming for higher inflation” and that “no one has yet designed a way

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,” American Economic Review 35, no. 4 (1935), pp. 519–30, http://www.econlib.org/library/Essays/hykKnw1.html. Charles Goodhart first articulated Goodhart’s Law . . . : The paper has been reprinted in several publications. See Charles Goodhart, “Problems of Monetary Management: The U.K. Experience,” in Anthony Courakis, ed., Inflation, Depression, and Economic Policy in the

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Bank of New York, Staff Report no. 574, October 2012, http://newyorkfed.org/research/staff_reports/sr574.pdf. “a thinly disguised way of aiming . . .”: Charles Goodhart, “Central Banks Walk Inflation’s Razor Edge,” Financial Times, January 30, 2013, http://www.ft.com/intl/cms/s/0/744e4a96-661c-11e2-b967-00144feab49a

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Was Allegedly for Iran.” Voice of Russia, January 6, 2013, http://voiceofrussia.com/2013_01_06/Gold-seized-at-Istanbul-airport-was-allegedly-for-Iran. Goodhart, Charles. “Central Banks Walk Inflation’s Razor Edge.” Financial Times, January 30, 2013, http://www.ft.com/intl/cms/s/0/744e4a96-661c-11e2-b967

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of Optimum Currency Areas.” American Economic Review 51, no. 4 (September 1961), pp. 657–65, esp. 659. Newman, Mark. “Power Laws, Pareto Distributions and Zipf’s Law.” Contemporary Physics 46 (September 2005), pp. 323–51. Nixon, Richard M. Address to the Nation Outlining a New Economic Policy, August 15, 1971, http://www

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York: Pantheon, 2011. Goldberg, Jonah. Liberal Fascism: The Secret History of the American Left from Mussolini to the Politics of Meaning. New York: Doubleday, 2008. Goodhart, C. A. E. The New York Money Market and the Finance of Trade, 1900–1913. Cambridge, Mass.: Harvard University Press, 1969. Graeber, David. Debt: The

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, 222 Goldman Sachs, 32–33, 128, 139, 140, 205, 206, 262 gold-to-GDP ratios, 157, 279–82 Goodhardt, Charles, 71, 72, 87, 188 Goodhardt’s Law, 71, 87 Gotthard Base Tunnel, 123 government debt repayment, impact of deflation on, 9, 258 government program dependency, in U.S., 246 Graeber, David, 255

The Geek Way: The Radical Mindset That Drives Extraordinary Results

by Andrew McAfee  · 14 Nov 2023  · 381pp  · 113,173 words

than $2.5 billion in fines over its false account scandal. The endless supply of examples like these has led some people to believe in Goodhart’s law, which states that “when a measure becomes a target, it ceases to be a good measure.” In other words, getting people to pay close attention

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example, tying their compensation to it—is almost sure to backfire somehow. Yet most of the business geeks I’ve talked to don’t let Goodhart’s law get in the way of their mania for measurement and all the things that accompany it—observation, experimentation, analysis, argumentation, and so on. There are

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a couple reasons for this. One of them is that the geeks believe Goodhart’s aphorism is not so much a law as a caution against overly simplistic measurement and reward schemes. If you tie a huge executive reward

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’s working? If you have the measurement, why is it increasing or why is it not increasing?” When I asked if he was worried about Goodhart’s law, he replied, “Univariate metrics are almost always inadequate, so for any area across Stripe we have our primary metrics. And we also try to choose

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like fifteen metrics on this product or area of our business or whatever, I don’t worry too much about Goodhart.” As Collison highlights, a key part of the geek response to Goodhart’s law is to pay attention to an entire dashboard of metrics, instead of any single number. Another key is to

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a target”: Michael F Stumborg, Timothy D. Blasius, Steven J. Full, and Christine A. Hughes, “Goodhart’s Law: Recognizing and Mitigating the Manipulation of Measures in Analysis,” CNA, September 2022, www.cna.org/reports/2022/09/goodharts-law#:~:text=Goodhart%27s%20Law%20states%20that%20%E2%80%9Cwhen,order%20to%20receive%20the%20reward. 73 tweeted

The Price of Time: The Real Story of Interest

by Edward Chancellor  · 15 Aug 2022  · 829pp  · 187,394 words

The Chimera 5 John Bull Cannot Stand Two Per Cent 6 Un Petit Coup de Whisky PART TWO How Low Rates Begot Lower Rates 7 Goodhart’s Law 8 Secular Stagnation 9 The Raven of Basel 10 Unnatural Selection 11 The Promoter’s Profit 12 A Big Fat Ugly Bubble 13 Your

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Locke, 1691. (Photograph: copyright © Christie’s Images / Bridgeman) 6. Portrait of John Law by Leonard Schenk, 1720. (Photograph: Rijksmuseum) 7. A banknote of John Law’s Banque Royale, Paris, 1 January 1720. (Photograph: copyright © Christie’s Images / Bridgeman) 8. Satirical illustration of speculators in the rue Quincampoix during the Mississippi Bubble

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the lender’s stake in the success and profit of the borrower, while usury was associated with the extortion of the needy.47 Queen Elizabeth’s law of 1571 legalized lending at interest, with the maximum rate capped at 10 per cent, but distinguished between interest and usury. In the words

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French central bank, and ran a vast corporate enterprise, known as the Mississippi Company, whose activities encompassed a large share of the French economy. Law’s shareholding in the company was worth a vast fortune, and he was ennobled as the Duke of Arkansas. That a foreigner and fugitive from English

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has been called the original monetarist – an eighteenth-century forerunner of Milton Friedman. His monetary policy prescriptions form the basis for modern central banking. Yet Law’s ‘System’, as he called it, was a spectacular failure. No sooner had the Scotsman achieved his eminence than the bubble burst, his project and

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outbreak of speculative fever wasn’t a random event. In this chapter, we trace the source of the Mississippi bubble and its subsequent collapse to Law’s ambitious monetary experiment and, in particular, his policy of expanding France’s money supply and cutting interest rates. While Locke considered the inconveniences that

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over France’s entire national debt, in exchange for an annual payment. Government creditors were given the opportunity to swap their bonds for shares in Law’s company. In the space of three years, the Scotsman had created ‘the most colossal financial power ever known’.13 His System, encompassing commercial, debt

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Simon described the scenes in the rue Quincampoix: there were crowds all day long … such wild excitement was never known before … Day by day, Law’s bank and his joint stock company gained in favour. People trusted both completely, rushing to turn their estates and houses into paper, with the result

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mother to the philosophe D’Alembert, opened a bureau boursier. The Regent’s mother delighted in relating Mississippi legends. If duchesses were prepared to kiss Law’s hand, she mischievously pondered, what parts of his body might other ladies favour? In a subsequent letter, Madame was less circumspect: ‘If Mr.

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a small down payment, speculators’ profits were highly leveraged to movements in the share price.fn4 The prospects of the Mississippi Company were hyped by Law’s agents in the press. Louisiana was described as a new El Dorado, abundant with gold and other precious metals. Le Nouveau Mercure reported that

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of Paris. (What these colonists encountered on their arrival at the nascent settlement of New Orleans was rather different from what had been described by Law’s propagandists. An early visitor, the Jesuit priest Father Charlevoix, found that New Orleans consisted of ‘one hundred randomly situated huts, a large wooden store,

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increase of fifty times on the earlier issuance of the General Bank, and roughly twice the quantity of gold and silver coins in circulation.26 Law’s earlier claim that an increase in the circulation of money would reduce the rate of interest was vindicated. As banknotes gushed forth, French interest

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capital than the Compagnie des Indes in the autumn of 1719 … In comparison, Apple Inc is a rag-and-bone shop,’ writes Law’s biographer James Buchan.36 Law’s personal stake in the Company made him, by his own calculation, the richest individual who had ever lived. He soon acquired a great

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… permits cupidity to exercise on this occasion the duties of charity.’41 Today, we call it the trickle-down effect. Yet no sooner had Law’s great edifice been put together than it started to collapse. The reasons for this failure are complex. The Scottish interloper had created powerful enemies, among

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comeback. Members of the Paris Parlement also loathed Law, whose reforms threatened to end their venal existence. Several contemporaries, including Saint-Simon, believed that Law’s efforts were doomed from the start because he was attempting to introduce modern institutions of finance – a national bank, paper credit, a funded national debt

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reduced. Law had finally embarked on a deflationary course. It was not a popular decision. Riots broke out, the Royal Bank was stormed, and Law’s personal carriage was smashed to pieces by the mob. The Regent quickly annulled the decree and sacked his finance minister. Law was subsequently reinstated, but

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decades, profits from the Mississippi Company’s trading operations grew at a lacklustre annual rate of half a per cent.58 Despite the fact that Law’s policies produced a surge of inflation and a great stock market crash, Ivy League academics warmly applaud his monetary notions. Peter Garber, a professor

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of economics at Brown University, claims that Law’s credit theory ‘is the centerpiece of most money and macroeconomics textbooks produced in the last two generations and the lingua franca of economic policymakers concerned

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government debt – somewhat similar to France’s after the death of Louis XIV. Monetary policymakers responded to these conditions by taking a leaf from Law’s copybook, pushing down interest rates and acquiring large chunks of their national debt (although not going quite so far as Law) with newly printed

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to embark on a grand monetary experiment, but there is no painless exit. ‘What central bankers are doing now is exactly what Law recommended,’ Law’s biographer Antoin Murphy wrote in the wake of the global financial crisis. ‘From this perspective, it may be argued that, notwithstanding the failure of

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the Mississippi System, Law’s banking successors have been Ben Bernanke, Janet Yellen and Mario Draghi.’62 5 John Bull Cannot Stand Two Per Cent It is a fact of

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every one does must be judicious. Foolish person No. II. imitates foolish person No. I.20 Bagehot himself never made that connection between John Law’s Mississippi Bubble and the 2 per cent interest rate that he introduced into France in 1719. Nevertheless, when we consider the speculative episodes he mentions

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’t going to make the same mistakes again. Part Two * * * HOW LOW RATES BEGOT LOWER RATES 7 Goodhart’s Law When a measure becomes a target, it ceases to be a good measure. Goodhart’s Law We have not targeted those things which we ought to have targeted, and we have targeted those things which

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more apt it will be to distort and corrupt the social processes it is intended to monitor.’ Historian Jerry Muller adds a corollary to Campbell’s Law, namely: ‘anything that can be measured and rewarded will be gamed.’ The most famous target law of all emerged several decades ago in the

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of Economics observed that whenever the Bank of England targeted a particular measure of money supply, that measure’s earlier relationship to inflation broke down. Goodhart’s Law states that any measure used for control is unreliable. The mistake in setting targets lies in assuming that relationships between variables – in this case

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certain measure of the money supply and inflation – are stationary. In the real world, human behaviour responds to attempts at control. ‘The essence of Goodhart’s Law,’ write John Kay and Mervyn King in their book Radical Uncertainty, is that ‘any business or government policy which assumed stationarity of social and economic

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the returns on their outstanding loans. ‘Zombie’ thrifts survived by offering higher deposit rates and taking more risk on to their loan books. Gresham’s Law states that bad money drives out good money. Under certain conditions, it applies to business conditions too. ‘In a kind of Gresham

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to determine the allocation of capital.18 Later studies showed that loss-making Japanese firms enjoyed better access to bank credit than profitable ones. Gresham’s Law was at work, once again. The zombification of Japan’s economy was associated with excess capacity across many industries – ranging from fridge makers to

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was something of an understatement. Bubbles are revealed by a rapid escalation in market price. Over the course of 1719 the share price of John Law’s Mississippi Company climbed nearly twentyfold. The rise in Bitcoin’s market price was even greater. Mississippi shares exhibited extreme volatility. Bitcoin’s price oscillations were

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Boosted by the low prevailing discount rate, Amazon shares traded on a price-earnings ratio above 100 times, more than twice the peak valuation of Law’s Mississippi Company. FINANCIALIZATION AND INEQUALITY In their history of inequality in the United States, Unequal Gains, Peter Lindert and Jeffrey Williamson suggest that inequality picks

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decade after 2008, American companies issued record quantities of investment-grade bonds at unprecedented low yields, as their indebtedness climbed to record highs.17 Gresham’s Law operated as debt issued by firms on the lowest rung of the investment-grade ladder (BBB) proliferated, while blue-chip corporate bonds (AAA) became

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Former BIS chief economist William White warned that negative rates put the global economy at risk.41 Charles Goodhart, a former member of the Bank of England’s Monetary Policy Committee (and originator of Goodhart’s Law), lamented the ‘failure of so many in authority to think through the likely effects of their policies

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Wealth of Nations would have been equally shocked by recent economic developments. Adam Smith was a fierce critic of monopolies in general, and of John Law’s Mississippi Company in particular. The merger wave, which has brought about a drop in market-based competition, and the proliferation of financialized companies would

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free to float into the stratosphere. A disconnect between finance and the real world lies at the heart of all great bubbles. Defoe described John Law’s Mississippi System as ‘an inconceivable Species of meer Air and Shadow … making the meer speculations of Things, act all the Parts, and perform all

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France in 1719, which printed paper money to bring down interest rates. 7. And drive up the value of shares in his Mississippi Company. Law’s System, a giant Ponzi scheme, collapsed after inflation took off. 8. A harlequin and a fool lift the curtains exposing frenzied trading in Mississippi

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The Age of Stagnation: Why Perpetual Growth is Unattainable and the Global Economy is in Peril (Amherst, NY, 2016). Davis, Andrew, ‘An Historical Study of Law’s System’, Quarterly Journal of Economics, April 1887: 420–52. Davis, Gerald, Managed by the Markets: How Finance Re-Shaped America (Oxford, 2009). Davis, Steven

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Growth of the National Debt in Western Europe’, American Economic Review, May 1947: 118–30. Hamilton, Earl J., ‘Prices and Wages at Paris under John Law’s System’, Quarterly Journal of Economics, November 1936: 42–70. Hanif, Farooq et al., ‘The Coming Pensions Crisis: Recommendations for Keeping the Global Pensions System

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Business in China (Washington, DC, 2014). Lardy, Nicholas R., Sustaining China’s Economic Growth after the Global Financial Crisis (Washington, DC, 2012). Law, John, John Law’s ‘Essay on A Land Bank’, ed. Antoin E. Murphy (London, 1994). Law, John, Oeuvres Completes, vol. I, ed. Paul Harsin (Paris, 1934). Lawson, Thomas

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p. 99. 21. Ibid., p. 100. 22. Janet Gleeson, The Moneymaker (London, 2012), p. 153. 23. Figures from Andrew Davis, ‘An Historical Study of Law’s System’, Quarterly Journal of Economics, April 1887. 24. Faure, La Banqueroute de Law, p. 334. 25. Memoirs of the Duke de Saint-Simon, An Abridged

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Origin and Growth of the National Debt in Western Europe’, American Economic Review, May 1947: 118–30. 48. Cited by Davis, ‘An Historical Study of Law’s System’, p. 444. 49. Gleeson, Moneymaker, p. 160. 50. Richard Cantillon, Essai Sur La Nature du Commerce en Général [1755], trans. Henry Higgs (London

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March 2015: 39. See also Andrew Atkeson and Patrick J. Kehoe, ‘Deflation and Depression: Is There an Empirical Link?’ NBER Working Paper, January 2004. 7. GOODHART’S LAW 1. Anna Schwartz, ‘Why Financial Stability Depends on Price Stability’, Economic Affairs, 15 (4), Autumn 1995. 2. Low inflation in the late 1980s was ascribed

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-term inflation, 110–14; interest rates under, 110–15, 117, 134–5, 134*, 162, 186, 190–91, 204, 226–7, 238, 252–3, 267 Gresham’s Law, 145–6, 224 Griffin, Ken, 209 Gross, Bill, 217, 221, 235, 236, 246 Grotius, Hugo, 40 Guinness (Irish brewer), 79 Gundlach, Jeffrey, 246 Gupta,

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supply in ancient world, 12–13; silver loans in ancient world, 6*, 9*, 10; from South America, 49, 168 metrics/targets, 119–20; Campbell’s Law, 120–21; Goodhart’s Law, 105, 121; limitations of, 120–23, 120* Mexico, 262 Middle Ages, 6, 18, 25, 35, 36; banking revolution in Italy, 22–3, 35;

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Buchan writes that Law is invoking a ‘new species of property, where your capital is of use to the entire body of the nation’. Law’s autocratic desire to prevent money-hoarding foreshadows recent calls to abolish physical cash, to stop money being hoarded, at a time when central banks were

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attempting to impose negative interest rates (Buchan, John Law, p. 271). fn9 ‘Law’s easy credit policy must have been largely responsible,’ wrote Hamilton, ‘for the failure of the market rate of interest to rise during the Bubble. In

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accentuated credit expansion and played an important role in the sharp upswing of prices’ (‘Prices and Wages at Paris under John Law’s System’, p. 63; see also François Velde, ‘John Law’s System’, American Economic Review, 97 (2), 2007). fn10 In his ‘Essay on the Land Bank’ (written around 1704), Law

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. History was to repeat itself during Bernanke’s time at the Fed in the early 2000s. fn15 For further discussion see Chapter 10. 7: Goodhart’s Law fn1 Although this book argues that price stability shouldn’t be the sole aim of monetary policy, this is not to say that inflation is

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Price of Anxiety fn1 Arthur Monroe, Early Economic Thought (Mineola, NY, 2006), p. 305. It’s not clear why Galiani thought interest rates under Law’s System were negative – at least in nominal terms. After subtracting for inflation, however, real interest rates in France in 1720 were extremely negative. Perhaps Galiani

How to Read Numbers: A Guide to Statistics in the News (And Knowing When to Trust Them)

by Tom Chivers and David Chivers  · 18 Mar 2021  · 172pp  · 51,837 words

: Cherry-picking Chapter 17: Forecasting Chapter 18: Assumptions in Models Chapter 19: Texas Sharpshooter Fallacy Chapter 20: Survivorship Bias Chapter 21: Collider Bias Chapter 22: Goodhart’s Law Conclusion and Statistical Style Guide Acknowledgements Notes Also by Tom Chivers Copyright Introduction Numbers do not feel. Do not bleed or weep or hope. They

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it’s not just medical testing. It has vital implications in law as well. In fact, a well-known and common failure of the law courts, the ‘prosecutor’s fallacy’, is essentially a misunderstanding of Bayes’ theorem. Andrew Deen was convicted of rape in 1994, partly on the basis of DNA evidence

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, even when the study has done its best to control for other factors. Sometimes, controlling for them can even make the problem worse. Chapter 22 Goodhart’s Law In April 2020, Britain – which was not at the time dealing conspicuously well with Covid-19 – was desperately trying to get its testing regime up

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simple number – the number of tests being carried out – end up getting so confused and misleading? There’s an old saying in economics, Goodhart’s law, named for Charles Goodhart, a former economic adviser to the Bank of England: ‘When a measure becomes a target, it ceases to be a good measure.’ It may

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care about GCSEs per se (the fact that GCSE grades control access to later stages of education doesn’t change that, it just makes the Goodhart’s effect even stronger). We don’t care how many patients are readmitted to hospital within thirty days, except insofar as that number tells us

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‘items of PPE’ produced, not caring about whether each ‘item’ is an N95 respirator mask or a single rubber glove.13 There are ways around Goodhart’s law, to some degree: changing metrics frequently, or assessing things using multiple metrics, can mitigate it. But no measurement will ever fully capture the underlying reality

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’s what happened with the 100,000 tests target. (This isn’t hindsight: Tom wrote ahead of the announcement that it was ‘a hotbed for Goodhart’s law’.15) The idea – and it was a noble one – was to set a target which would, like the bonus for car sales, drive up the

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how to avoid statistical errors from one quite short book. And lots of the mistakes we’ve discussed are deep and systemic. For instance, avoiding Goodhart’s law – the problem of measures becoming targets – is a huge issue at every level of government and business. The demand for novelty in science, let alone

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partial explanation for the obesity paradox’, Epidemiology, 27(4) (July 2016), pp. 525–30 doi:10.1097/EDE.0000000000000493. PMID: 27075676; PMCID: PMC4890843. Chapter 22: Goodhart’s Law 1. Patrick Worrall, ‘The target was for 100,000 tests a day to be “carried out”, not “capacity” to do 100,000 tests’, Channel 4

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.uk/correspondence/sir-david-norgrove-response-to-matt-hancock-regarding-the-governments-covid-19-testing-data/ 9. Daisy Christodoulou, ‘Exams and Goodhart’s law’, 2013 https://daisychristodoulou.com/2013/11/exams-and-goodharts-law/ 10. Dave Philipps, ‘At veterans hospital in Oregon, a push for better ratings puts patients at risk, doctors say’, the

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, 3(1) (20), pp. 44–53 doi:10.1001/jamacardio.2017.4265 12. Fire, M. and Guestrin, C., ‘Over-optimization of academic publishing metrics: Observing Goodhart’s law in action’, GigaScience, 8(6) (June 2019), giz053 https://doi.org/10.1093/gigascience/giz053 13. ‘Millions more items of PPE for frontline staff from

Cogs and Monsters: What Economics Is, and What It Should Be

by Diane Coyle  · 11 Oct 2021  · 305pp  · 75,697 words

aggregate also induced changes in people’s behaviour that made that aggregate irrelevant for the wider policy aim—in this context, this is known as Goodhart’s Law, which states that the act of targeting a variable eliminates the information that made it a useful policy indicator in the first place. As Charles

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it, ‘Any observed statistical regularity will tend to collapse once pressure is placed upon it for control purposes’ (Goodhart 1975, 122). It is another example of the reflexive nature of economic policy analysis discussed above. Nevertheless, the government of the day clung on to

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computer programme) joined the earlier official targets in the next Budget, although it also subsequently joined them in their unwelcome exuberance. It lived up to Goodhart’s Law, as its growth accelerated as soon as it became an official policy target (renamed PSL2). The point of this anecdote is that the refraction of

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beings who—all too often—change their behaviour in response to policy changes, or even policy debate. Of course, economists know this. While we have Goodhart’s Law described earlier (that targeting a variable changes its behaviour), in the context of macroeconomics we also have the Lucas Critique (stating that historical relationships are

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. The extraordinary decline in the price of computational power (computations per second) through different technological generations has been calculated by William Nordhaus (2015), reflecting Moore’s law.1 The falls in price have accelerated over the years; the cost of computation has gone from prohibitive (massive mainframes owned by the government or

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collective monsters. Taming them will require recognition of this interdependence, so we can understand, and perhaps manage, the economic challenges the world faces. 1. Moore’s law predicted a doubling of the computer power or a halving of the price every eighteen months or two years. https://www.intel.co.uk/content

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goods—would increase the time needed by a polynomially greater factor. Of course, the power and speed of computers has increased in line with Moore’s law since 1983, giving new hope to the advocates of socialist calculation. Surely AI can finally deliver us an efficient central planner? Computational economic planning was

…

, Oxford: Oxford University Press. Glaeser, E., and J. A. Scheinkman, 2000, ‘Non-market Interactions’, NBER Working Paper 8053, National Bureau of Economic Research, Cambridge, MA. Goodhart, C.A.E., 1975, ‘Problems of Monetary Management: The U.K. Experience’, Papers in Monetary Economics (1). Gordon, Robert, 2016, The Rise and Fall of

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, London: Macmillan, 315–334. Keynes, J. M., 1936, The General Theory of Employment, Interest and Money, London: Macmillan. Khan, Lina M. 2017, ‘Amazon’s Antitrust Paradox’, Yale Law Journal, 126 (3), 564–907, https://www.yalelawjournal.org/pdf/e.710.Khan.805_zuvfyyeh.pdf. Khan, M., 2015, ‘UK Economy Grew at Fastest

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, 91–92, 118–19, 186; competition and, 45–51 (see also competition); consumers and, 22, 59–60, 92, 109; context and, 88; failures and, 55; Goodhart’s Law and, 72, 103; happiness and, 70–71, 153; incentives and, 29, 33, 35, 55, 63–64, 80, 106, 110, 160, 200; interventions and, 48, 63

…

; David on, 169; declining price of, 170; empirical work and, 2, 17, 52; exchange locations and, 25; feedback and, 179; Millennium Bug and, 155; Moore’s Law and, 170, 184; power of, 2, 17, 40, 58, 170, 183–84, 188; progress and, 138, 144, 155; rationality and, 116–17; servers and, 25

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, 69 Glaeser, Ed, 92 globalisation, 110, 132, 139, 154, 164, 193–96, 213 Goldman Sachs, 19 Good Economics for Hard Times (Banerjee and Duflo), 109 Goodhart’s Law, 72, 103 Google, 133, 141, 173, 201, 204–5 Gordon, Robert, 142 Gould, Stephen Jay, 49–50 Gove, Michael, 110, 149 Government Economic Service (GES

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and, 16–17, 132; empirical work and, 17, 61, 78, 209; endogenous growth theory and, 17, 202; faster, 66, 71, 144, 159; forecasting, 37, 61; Goodhart’s Law and, 72; Gross Domestic Product (GDP) and, 28, 46, 88, 97, 138, 143–44, 159, 165, 169, 171–72; income, 70, 131, 138, 143, 164

…

Theory (MMT), 75, 102 monetarism, 16, 71, 73, 75 monopolies, 20, 29, 42 Monti, Mario, 67–69 Mont Pèlerin Society, 31, 191, 193–94 Moore’s Law, 170, 184 moral issues: Atkinson and, 129; causality and, 96; Cook and, 150; ethics, 4, 34, 39, 100, 105, 115, 119–24; fairness, 43, 45

…

; computers and, 17, 52, 58, 144, 169; digital economy and, 113, 150, 164, 170, 172, 212; empirical work and, 17, 52, 61, 90, 95, 99; Goodhart’s Law and, 72; improved methods for, 99–103; inflation and, 113, 146, 148, 164; macroeconomics and, 101–2, 113, 131; microeconomics and, 58, 101; Office for

…

(see also innovation); internet and, 46, 97, 133, 138–39, 168, 198; machine learning and, 12–13, 137, 141, 160–61, 187; materials, 127; Moore’s Law and, 170, 184; outsider context and, 103; production and, 12, 132, 140, 169, 176, 195–96, 202, 213; productivity and, 127, 142, 153, 169, 172

The Skeptical Economist: Revealing the Ethics Inside Economics

by Jonathan Aldred  · 1 Jan 2009  · 339pp  · 105,938 words

its philosophical virtues, economists who adopt this view should be more aware of the implicit value judgements they make. If breaking the law serves the law breaker’s self-interest, then it is by definition rational, according to the Homo economicus worldview. And it is but a short step from lawbreaking being

…

must confront its relationship with democratic politics. As I have argued, the Greatest Happiness principle cannot stand above politics. Another problem is what economists call Goodhart’s Law.9 A succinct definition is: ‘when a measure becomes a target, it ceases to be a good measure’. So once governments target aggregate measures of

…

self-reported happiness, these measures cease to track ‘true’ happiness. Goodhart’s Law can be thought of as the application to human society of Heisenberg’s Uncertainty Principle in quantum physics. Put simply, measuring a system generally disturbs

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is not supported by most independent reviews of the audit culture.23 On the contrary, Goodhart’s Law (introduced in Chapter 5) is frequently mentioned: when a measure becomes a target, it ceases to be a good measure. Goodhart’s Law suggests that distortions and unintended consequences are an unavoidable part of any target regime. Once

…

worker may serve many masters, each of whom has different views about which aspects of the job matter most. Taken together, the problems posed by Goodhart’s Law, multitasking, team working, multiple masters, and the fundamental difficulty of defining and measuring a qualitative ‘output’ greatly limit the applicability of PRP schemes. More generally

…

public service, but because of multiple underlying principles governing its provision. So the risk of problems arising from multiple goals — such as perverse effects and Goodhart’s Law — is substantially increased. More importantly, principled disagreement calls into question the goals set by the audit culture in the first place. Both the front-line

…

self-fulfilling, economists are tempted to be smug. But other performative aspects of economics are not so reassuring. Chapter 7 provided two examples. According to Goodhart’s Law, attempting to measure something, for the purpose of controlling or targeting it, tends to change it, undermining the meaning or purpose of the measurement. And

…

and Stutzer (2007), who reject the goal of maximizing national happiness. I agree with some of their reasons - such as the exclusion of politics and Goodhart’s Law (see below) - but disagree with their suggested alternative, which appears to be ‘the best possible fulfilment of individual preferences’ (p16). Nor is it clear why

…

non-humans, especially the higher apes, and some philosophers see few reasons for giving it less significance. See for example Cavalieri and Singer (1995). 59 Goodhart (1975). 60 And the more exacting the measurement, and the shorter the timescale over which measurement takes place, the greater the energy of the disturbance

…

. E. Fullbrook (ed) London, Anthem Press Gneezy, U. and A. Rustichini (2000) ‘A fine is a price.’ Journal of Legal Studies 29(1): 1-18 Goodhart, C. (1975) Money, Information and Uncertainty. London, Macmillan Goodin, R. (1986) ‘Laundering preferences’ in Foundations of Social Choice Theory. J. Elster and A. Hylland (eds

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164 game theory 222, 233 goals happiness 125, 126, 129-133 monetary incentives 200-201 for public services 199, 201-202 self interest 17, 37 Goodhart’s Law 141, 192, 194, 202, 223-224 governments auditing public services 203-204 consumer sovereignty 30, 38, 186 economic growth 47-48, 49, 68 Greatest Happiness

The Choice Factory: 25 Behavioural Biases That Influence What We Buy

by Richard Shotton  · 12 Feb 2018  · 184pp  · 46,395 words

: Expectancy Theory Bias 12: Confirmation Bias Bias 13: Overconfidence Bias 14: Wishful Seeing Bias 15: Media Context Bias 16: The Curse of Knowledge Bias 17: Goodhart’s Law Bias 18: The Pratfall Effect Bias 19: Winner’s Curse Bias 20: The Power of the Group Bias 21: Veblen Goods Bias 22: The Replicability

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better understand your audience. Sometimes data can be downright misleading if not interpreted correctly. We’ll address that issue in the next chapter. Bias 17: Goodhart’s Law The danger of poorly set digital targets Today is the last working day of the quarter and you need to register a large sale to

…

system to boost income, but in this case it has reduced it. This poorly set target, which led to unintended consequences, is an example of Goodhart’s Law. This states: When a measure becomes a target, it ceases to be a good measure. One infamous example of unintended consequences is from Hanoi, Vietnam

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to Stick: Why Some Ideas Survive and Others Die by Chip Heath and Dan Heath [2008] The Wiki Man by Rory Sutherland [2011] Bias 17: Goodhart’s law Long and Short of It: Balancing Short- and Long-Term Marketing Strategies by Les Binet and Peter Field [2012] Management in 10 Words by Terry

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error general election, UK Genovese, Kitty Genovese syndrome see bystander effect Gilbert, Dan Give Blood campaign, NHS gluten-free products Gocompare Goldstein, Noah good mood Goodhart’s Law Goodman, Cecile Gossett, William Sealy green goods Griffiths, Dylan Griskevicus, Vladas groups Guinness Gumroad habits Haidt, Jonathan Halifax Halpern, David Harford, Tim Hastorf, Albert heavy

Calling Bullshit: The Art of Scepticism in a Data-Driven World

by Jevin D. West and Carl T. Bergstrom  · 3 Aug 2020

size of the country’s net growth, even though only a small fraction of the total jobs created in the country were created in Wisconsin. GOODHART’S LAW When scientists measure the molecular weights of the elements, the elements do not conspire to make themselves heavier and connive to sneak down the periodic

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admissions departments’ willingness to chase metrics as they did by the quality of schools’ applicants. This problem is canonized in a principle known as Goodhart’s law. While Goodhart’s original formulation is a bit opaque,*8 anthropologist Marilyn Strathern rephrased it clearly and concisely: When a measure becomes a target, it ceases to

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will not necessarily correspond to higher profits as salespeople offer bigger discounts to make sales and make them quickly. At around the same time that Goodhart proposed his law, psychologist Donald Campbell independently proposed an analogous principle: The more any quantitative social indicator is used for social decision-making, the more

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50 percent to passengers traveling in the front seat of a passenger car, and by even greater amounts to passengers traveling in light trucks. *8 Goodhart originally expressed his law as: “Any observed statistical regularity will tend to collapse once pressure is placed upon it for control purposes.” *9 In more

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’s just that they don’t go in for treatment. Instead they end up in prison, or on Wall Street. THE HIDDEN CAUSE OF MURPHY’S LAW In Portugal, about 60 percent of families with children have only one child, but about 60 percent of children have siblings. This sounds impossible, but

…

small classes have few, so if you sample students at random, students are more likely to be in large classes.*5 Recall from chapter 5 Goodhart’s law: “When a measure becomes a target, it ceases to be a good measure.” Class sizes provide an example. Every autumn, college and university administrators wait

…

generated nonsignificant results end up in scientists’ file cabinets (or file systems, these days). This is what is sometimes called the file drawer effect. Remember Goodhart’s law? “When a measure becomes a target, it ceases to be a good measure.” In a sense this is what has happened with p-values. Because

…

their reputations by publishing only high-quality work. But for some, money is money—they’ll publish anything provided that the check clears. Here is Goodhart’s law’s again: When a measure becomes a target, it ceases to be a good measure. This has happened to a substantive swath of the scientific

…

tries to talk his way out of his predicament. “Why would I [urinate in public] unless I was in mortal danger? I know it’s against the law,” Jerry tells the officer who is booking him into jail. He then answers his own question: “Because I could get uromycitisis poisoning and die

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to Be Wrong: The Power of Mathematical Thinking. New York: Penguin Press, 2014. Garfield, Eugene. “I Had a Dream…about Uncitedness.” The Scientist. July 1998. Goodhart, Charles. “Problems of Monetary Management: The U.K. Experience.” In Inflation, Depression, and Economic Policy in the West, edited by Anthony S. Courakis, 111–46

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